A SIMPLE COMPARISON: RENTAL PROPERTY VS. ONGOING RIA FEES
Imagine you purchased a rental property or commercial building. Would you agree to pay your broker or real estate agent 1% of the property value every year… indefinitely? Highly unlikely. Instead, the standard model in real estate has always been a one-time commission of approximately 5%–6%. Why? Because over time, a recurring fee structure becomes dramatically more expensive than a one-time fee. This model would drastically eat into potential returns on your real estate purchase. The same logic applies to DSTs. Traditional DST investments follow a one-time fee structure (typically around 5%, fully disclosed in the PPM). Under the RIA AUM model, investors pay approximately 1% per year, EVERY year. At first glance, 1% may seem minimal, but over time, it compounds into a significantly higher total cost.
REAL CASE STUDY: A 2008 DST INVESTMENT (12-YEAR HOLD)
To illustrate this, let’s look at a real example of the first DST investment Dwight Kay personally made—an apartment community DST outside Seattle, WA, purchased in 2008 with a hold period of approximately 12 years. Fee Comparison Over 12 Years: The RIA AUM Model (1% annually) would have resulted in roughly 12% in total fees (1% x 12 years), while the Traditional DST Structure would have been approximately 5% (one- time). The Bottom-Line Outcome: The RIA model resulted in more than double the fees compared to the traditional real estate-style commission. This is not theoretical, it is real-world math based on an actual investment.
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